City won’t be norm in distress

Desire to leave program unique, officials say

June 19, 2012

At an introductory meeting Wednesday, members of the Altoona's Act 47 distress recovery team told officials that working with the city promises to be different from what they're used to.

For the first time, they'll be dealing with a municipality that wants to quickly get out of the state's financial distress program, they said.

"[Altoona] wants to create an Act 47 plan that will have an end date," said team leader John Espenshade of recently hired distress coordinator Stevens & Lee, "instead of an open-ended Act 47 [plan]."

Article Photos

Mirror photo by Gary M. BaranecJohn Espenshade, Act 47 coordinator for Altoona, fields questions from City Council members during a session on Monday. Seated beside Espenshade are other members of the Act 47 team.

Based on the unusually low level of hostility, high level of professionalism and a cooperative attitude experienced in meetings with managers, unionists and City Council, Espenshade is optimistic it will work.

"That has not always been the case," he said.

Altoona resisted entering distress, and now that it's in, it wants to get out quickly - in contrast to other municipalities, which don't want to give up the tools it gives, which include the lifting of state caps on property and earned income tax.

The key to getting out of distress is sustainability, Espenshade said.

The key to sustainability will ultimately be regrowing the tax base, said Michael Foreman, a policy specialist with the state Department of Community and Economic Development.

The key to regrowing the tax base will be public-private partnerships that will allow for business growth in a city that began losing its economic momentum in the aftermath of World War II, when businesses and residents fled to plentiful spaces in surrounding townships.

Such growth can only occur in the context of disciplined fiscal management - the kind that enabled six boroughs to escape distress, as Altoona hopes to do, Foreman said.

"Reality-based budgeting," Foreman said.

It will require a new negotiating strategy with the unions, especially if the General Assembly fails to pass a law that would restore the primacy of distress recovery plans over binding arbitration awards for public safety workers, Stevens & Lee partner Susan Friedman said.

The strategy will require complete transparency on the budget in negotiations, so that both sides can agree on a reasonable share of the available money to go towards all the groups of workers.

That wasn't the case in the past, when both sides weren't showing all their cards.

"There wasn't that transparency," City Manager Joe Weakland said.

Now, if such a case goes to binding arbitration, the city and its team are hoping that an arbitrator will have little reasonable choice but to accept what both sides have agreed would be a reasonable amount.

Trust will play a big part in making that work, Friedman said.

Espenshade said he was making no promises, and couldn't say whether freedom from distress would come in three, five or seven years.

But it shouldn't take 10 or 20, he said.

After the team has a draft plan, there will be informal public meetings to solicit comments and ideas, Espenshade said.

Espenshade declined to say whether he expected the plan to include hikes in property or earned income tax.

Act 47 lifts the state caps on those, although exceeding those caps would require court approval every year.

In recent months, city officials have said "everything's on the table."

"The scope of work calls for [the coordinator] to revisit all assumptions," Foreman said.

Other municipalities have made big changes.

Churchill Borough has gone all the way with privatization, employing only a manager, who oversees contract workers who take care of all public safety and maintenance functions, said DCED policy specialist Marita Kelley, adding that she wasn't recommending that for Altoona.

Ultimately, the team may propose fixes that would be surprising, if contemplated now, Weakland said.

But he expects an "evolutionary" approach that will make them unsurprising by the time they come into the discussion.

The team will need to work for "total buy-in," Espenshade said.

"There will be joint suffering," Espenshade said. "Around the table and around the community."

The recovery plan may consist of perhaps 150 items - some big, some small, Kelley said.

Because Altoona has worked for years to trim excess, there probably isn't much "low-hanging fruit," Kelley said.